Event study methodology is a widely-used technique for measuring the impact of specific events on the value of a firm or a security. This website provides an introduction to the event study methodology, its applications, assumptions, and the steps involved in conducting an event study. It also discusses the estimation window, event window, and the potential limitations and challenges associated with event studies.
Event study methodology is a popular research tool used by researchers, practitioners, and policymakers to evaluate the effect of a specific event on the value of a firm or a security. It involves analyzing the market’s reaction to events, such as earnings announcements, mergers and acquisitions, regulatory changes, or natural disasters, by measuring the abnormal returns that can be attributed to the event. By isolating the impact of the event from other factors that affect security prices, event studies provide valuable insights into the efficiency of financial markets and the value relevance of various corporate actions and announcements.